House prices up? Blame gov't planners

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A report commissioned by the Israel Lands Administration suggests that improper zoning by the Interior Ministry has caused real estate prices in the Center of the country to rise.
The report, compiled by an independent company and presented to ILA officials this week, found discrepancies between predictions made in the National Outline Plan and facts on the ground. It discovered that while the national plans had predicted a rise in population in the country's periphery, the forecast had been wrong. In fact, demand in the Center remained high, and Israel's outskirts remained underpopulated.
In 2005, the government approved the Comprehensive National Outline Plan for Construction, Development and Conservation (NOP 35), which addressed the country's development needs until 2020. The plan's vision entailed the principle of "deconcentrated concentration," where the population would be dispersed at the national level and concentrated at the regional level, thus creating large urban centers all across the country.
"NOP 35 proposes to change Israel's longtime traditional policy. It argues that the periphery is a national resource rather than a social and economic burden," wrote Shamai Asif, an Interior Ministry official and one of the plan's authors. "The transfer of capital investments for the development of human capital and innovative infrastructure and communication systems to the periphery is essential."
The ILA hired a private consulting firm, Tochen Tichnun, Economy and Management, to assess the report and examine the implementation of NOP 35's population predictions in comparison with what actually happened.
"The plan determined certain policy principles. These principles assumed that the periphery cities would expand and that the planning would break up the settlement chunks in the Center. In practice, the market behaved differently," said Sigal Rasis of Tochen Tichnun.
NOP 35 predicted, for example, that Rishon Lezion would have 352,000 residents in 2009. In actuality 409,500 live there, a discrepancy of 57,500 people. At the same time, it predicted that the population in Beersheba would be 365,000, when in actuality, the number is lower by nearly 35,000.
ILA officials claim that the miscalculation has limited their ability to release lands for construction in some parts of the country.
"Over the years, we've attempted to initiate hundreds of construction plans, but in many cases, we encounter difficulties in promoting the plans and identifying areas that can be built on without restrictions," said ILA planning department director Rafi Elmaliach.
"When we examined the areas that were authorized by the plan, we found that on paper, there was enough land. We were puzzled. We didn't understand why, if there was enough land, we were having such a hard time," he went on. "On closer examination, it turned out that while many areas are zoned for urban development, in practice they couldn't function as such."
Elmaliach said many of the areas had turned out to be used for other purposes, such as military facilities or agriculture.
"Nothing of what the NOP envisioned came to fruition. The reason it didn't is because of a failure in implementing the supporting policies," said Elmaliach. "I'm referring to things like building transport infrastructure, education facilities, job markets and cultural amenities. The moment you don't do all these things together, there's no chance the population will relocate from the Center to the outskirts."
According to Elmaliach, the Interior Ministry's planning commission is trying to force the matter in order to implement its vision. He told of a 600-unit project in Beit Dagan, near Rishon Lezion, where the local ministry authorities had blocked construction, arguing that they would no longer be developing the Center.
Things like this, said Elmaliach, drive up prices because there's too much demand and not enough new building.
As a counter-example, Elmaliach described a situation in Arad in which the ILA had tried to market new areas for contraction of high-rise apartments, but had failed to interest any developers.
"Perhaps if it had been zoned for low-density dwellings instead, people would be more interested," he said.
While NOP 35 was authorized in 2005, it was first drafted in 2000, and the predictions it made were based on population indicators collected in the 1995 census. This helps explain why some of the forecasts were off.
An extreme example was the discrepancy between the NOP's prediction and reality in the city of Modi'in. The ILA study found a 59,000-person discrepancy, in a city of roughly 70,000.
"[The municipality of] Modi'in didn't even exist back then," said Rasis.
Before the end of 2009, NOP 35 is up for its first four-year status examination, in which a group of experts checks to see if the plan is on target.
Elmaliach said he hoped that with the help of the new report, the plan would get on a more accurate track..
A spokesman for the Interior Ministry was unavailable for comment.

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